Section 17 of the Income-tax Act defines perquisites, including benefits provided by employers to employees. Currently, employee benefits such as free or concessional amenities are exempt from perquisite taxation only if the employee’s salary does not exceed ₹50,000. Additionally, employer-paid medical travel outside India is exempt for employees with a gross total income below ₹2 lakh. These limits, set decades ago, do not reflect current economic conditions. The Finance Bill, 2025 proposes amendments allowing the government to set these income thresholds through rules, making them adjustable over time. This change ensures that employee benefits and medical travel exemptions remain relevant. The amendment will take effect from April 1, 2026, for assessment year 2026-27 and beyond.
Budget 2025: Increase in the limits on the income of the employees for the purpose of calculating perquisites
The existing provisions of clause (2) of section 17 provide, inter-alia, that ‘perquisite’ includes the value of any benefit or amenity granted or provided free of cost or at concessional rate by any employer (including a company) to an employee whose income under the head “Salaries” as a monetary benefit does not exceed fifty thousand rupees. This upper limit on income was determined by the Finance Act 2001.
2. Further, the proviso to clause (2) of section 17 provides that any expenditure incurred by the employer for travel outside India on the medical treatment of an employee or any member of the employee’s family shall not be included in ‘perquisite’, subject to the condition that the gross total income of such employee does not exceed two lakh rupees. This upper limit on income was determined by the Finance Act, 1993.
3. These limits on the income of the employees for the purpose of calculating perquisites were put in place more than 20 and 30 years ago respectively. Thus, there is a need to adjust these limits accordingly to take into account changes in standard of living and economic conditions.
4. It is proposed that the provisions of section 17 may be amended so that the power to prescribe rules may be obtained to increase the limit on the gross total income of the employees so that,-
(I) the amenities and benefits received by such employees would be exempt from being treated as perquisites.
(II) the expenditure incurred by the employer for travel outside India on the medical treatment of such employee or his family member would not be treated as a perquisite.
5. These amendments will take effect from the 1st day of April, 2026 and shall accordingly, apply in relation to the assessment year 2026-27 and subsequent assessment years.
[Clause 9]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 9 of the Bill seeks to amend section 17 of the Income-tax Act relating to “salary”, “perquisite” and “profits in lieu of salary” defined.
The existing provisions of clause (2) of section 17, inter alia, provide that for the purposes of section 15 and section 16 of the Income-tax Act, “perquisite” includes the value of any benefit or amenity granted or provided free of cost or at concessional rate by any employer (including a company) to an employee who is not a director of the company or has a substantial interest in the company, and whose income under the head “Salaries”, whether due from, or paid or allowed by, one or more employers, other than the value of all non-monetary benefits or amenities, exceeds fifty thousand rupees.
Further, the Proviso to the said clause provides that any expenditure incurred by the employer on medical treatment of an employee or any member of the family of such employee, outside India, travel and stay abroad of the employee or any member of the family of such employee for medical treatment, or travel and stay abroad of one attendant who accompanies the patient, shall not be included in “perquisite”, subject to the condition, among others, that the expenditure on travel shall be excluded only in the case of an employee whose gross total income, as computed before including the said expenditure, does not exceed two lakh rupees.
It is proposed to amend the provisions of the said section so as to provide that “perquisite” includes the value of any benefit or amenity granted or provided free of cost or at concessional rate by any employer, including a company to an employee who is not a director of the company or has a substantial interest in the company, and whose income under the head “Salaries”, whether due from, or paid or allowed by, one or more employers, other than the value of all non-monetary benefits or amenities, exceeds such amount as may be provided by rules.
It is further proposed to provide that the expenditure on travel incurred by the employer on medical treatment of an employee shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including the said expenditure, does not exceed such amount as may be provided by rules.
These amendments will take effect from 1st April, 2026 and will, accordingly, apply in relation to the assessment year 2026-2027 and subsequent assessment years.
Clause 9 of the Bill seeks to amend clause (2) of section 17 of the Income-tax Act relating to “salary”, “perquisite” and “profits in lieu of salary” defined.
It is proposed to amend paragraph (c) of sub-clause (iii) of clause (2) to empower the Board for making rules to determine the amount.
In clause (2), it is further proposed to amend the proviso occurring after sub-clause (viii) of clause (vi), in the long line, in clause (B) to empower the Board for making rules to determine the amount.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
9. Amendment of section 17.
In section 17 of the Income-tax Act, in clause (2), with effect from the 1st April, 2026,––
(a) in sub-clause (iii), in paragraph (c), for the words “fifty thousand rupees”, the words “such amount as may be prescribed” shall be substituted;
(b) in the proviso occurring after sub-clause (viii), in clause (vi), in the long line, in clause (B), for the words “two lakh rupees”, the words “such amount as may be prescribed” shall be substituted.
